The Analysis to Aid Public Comment fully describes the Commission action in this
matter. Some comments by our dissenting colleagues, however, require a brief response.

The Commission has accepted for public comment a consent order from McCormick &
Company Inc. ("McCormick") in which the company has agreed to cease and desist
granting discounts (partly in the form of up-front shelf-allocation payments) to large
chains without making comparable payments available to other chains and independents that
compete with the favored chains. Under the Supreme Court's controlling decision in FTC
v. Morton Salt Co.,(1) injury to competition at the
retailer (i.e., "secondary") level can be inferred where substantial and durable
price discrimination exists between competing purchasers who operate in a market with low
profit margins and keen competition.

McCormick is far and away the largest manufacturer and supplier of full lines of spices
to grocery stores in the United States. In the early 1990s, it found itself in a price war
with Burns-Philp Food Inc. ("Burns-Philp"), its only full-line competitor.
Substantial discriminatory discounts were granted to favored chains, often accounting for
many individual stores, and not to competing retailers.

In examining McCormick's discounts, the Commission did not simply apply the Morton
Salt presumption in finding injury to competition, but examined other factors,
including the market power of McCormick and the fact that discounts to favored chains were
conditioned on an agreement to devote all or a substantial portion of shelf space to the
McCormick line of products. Our dissenting colleagues applaud the fact that the Commission
is willing to examine injury to competition by looking at factors beyond those narrowly
described in the Morton Salt approach, but conclude that those factors do not
justify a secondary-line price discrimination case here. We do not find their arguments
persuasive.

1. The dissenting Commissioners observe that the discriminatory discounts were granted
in the midst of, and possibly because of, a price war. But the Robinson-Patman Act limits
on discriminatory pricing - including the rule that a seller can meet but not exceed
prices offered by a competitor(2) - are not suspended
during price wars.

2. Our colleagues suggest that this is a primary-line case (i.e., injury at the
producer level) masquerading as a secondary line (injury at the retailer level)
enforcement action. But that kind of distinction between primary-line and secondary-line
anti-competitive effects is unduly rigid and mechanical -- particularly in light of the
facts of this matter. It is true that part of the injury at the secondary level occurred
because McCormick's behavior injured its only full-line competitor. But that is just one
part of the secondary-line case. The fact remains that favored chain store buyers received
from a dominant seller substantially better discounts than disfavored buyers, and they
were injured, and competition at the secondary line was injured, as a result. Moreover,
with Burns-Philp out of the picture as an aggressive competitor, chain stores and other
retailers at the secondary level will be denied benefits of future competition.

3. The Commission was influenced in the decision to enforce the Robinson-Patman Act
here because McCormick is a dominant seller. Our colleagues' conclusion -- that market
dominance by the discriminating seller should be irrelevant to secondary-line price
discrimination -- flies in the face of commentary by leading scholars such as Herbert
Hovenkamp suggesting that the dominance of the seller is exactly the factor that should be
examined in the exercise of prosecutorial discretion.(3)

The essential feature of Commission action here should not be lost in a quarrel over
particular facts. As the Analysis to Aid Public Comment points out, there will be
circumstances in which the Morton Salt presumption is appropriate and
dispositive. There may be other market settings in which it makes sense for the
Commission, as a matter of prosecutorial discretion, or the Commission and Courts, in the
process of considering whether there has been a violation, to look past the Morton
Salt factors to a broader range of market conditions to determine whether there has
been real injury to competition. Taking those additional factors into account, the
majority concluded that there was injury not just to the disfavored buyers, but to
secondary-line competition generally.

2. See Falls City Indus. v. Vanco Beverage, Inc.,
460 U.S. 428, 446 (1983) ("a seller's response must be defensive, in the sense that
the lower price must be calculated and offered in good faith to 'meet not beat' the
competitor's low price.")

3. See, e.g., Herbert Hovenkamp, Market Power
and Secondary-Line Differential Pricing, 71 Geo. L.J. 1157, 1170 (1983)
("Systematic, long-term price discrimination can be achieved only by a seller with
market power. If the seller does not have market power, purchasers asked to pay the higher
price will purchase from another seller willing to sell at a more competitive
price.")